Marketing and selling in favourable economic
Rules for creating retail innovation
In a previous article, I highlighted the
fact that Retail is the world’s largest industry. In this brief
article, my endeavour is to highlight inputs for creating innovation
in the retail industry.
Look for consumer trends
There are several key demographic and behavioural changes that are
happening among consumers. Putting the customer first, is the foundation
for success in retailing. It is important to keep in mind, that it is
easier to launch a new idea that is in tune with future consumer demand,
than one that fights its.
In a Sri Lankan context, we have observed trends such as an ageing
population, a hybrid of values (modern and traditional) and western
lifestyles. There is also a larger percentage of women in the workforce.
Sri Lankan retailers would do well to understand these trends and
formulate future strategies accordingly.
Understand the competitive environment
It almost goes without saying that retailers and suppliers must pay
very close attention to their direct competitors. But it is amazing to
note how many direct competitors are missed or not considered seriously.
My advice to retailers is also to monitor indirect competitors. For
example, supermarkets can be indirect competitors for clothing chains,
since they both compete for the disposable income of the consumer.
Retailers should also keep their eyes and ears open for potential
competitors. In a Sri Lankan context, this is now very important, given
the opportunities that exist in the market. There are powerful retail
players in India, Thailand and Vietnam eyeing Sri Lanka.
Location, location, location
I cannot keep out the importance of location, for retail success.
Countless retail concepts have failed because they are put in the wrong
Spend a lot of time and energy in researching retail locations,
before setting up shop. Demographics, infrastructure, accessibility,
neighbourhood characteristics etc., are very important factors to
It is better to pay a higher rent for the right location, than trying
to save some rent money and ending up in the wrong location. (Penny wise
The concept of “Store Positioning”
Positioning makes you declare who you want to serve, against what set
of competitors, and what unique benefits you will deliver.
As much as product brands need to be positioned, retailer brands
(store brands) needs to be positioned as well.
By positioning a store cleverly, significant competitive advantages
can be achieved. Take the example of Walmart and the position of
“Everyday low prices.”
Since customers perceive Walmart as offering the best prices, the
store too is under pressure to live up to the positioning theme.
In Sri Lanka, Cargills Food City came up with the positioning theme -
“on your way home.” This has worked for them, as people remember Food
City when they think of returning home.
You cannot simply succeed in retailing without positioning. My advice
to retailers is to be creative and innovative in positioning and have
the courage to reposition if the market situation demands it.
Understand your key competencies
Every retailer possesses certain competencies, some which are equal
to others and others unique and significant. To create an innovation in
retail, focus on the unique competencies you have as a retailer.
This may be in supply chain efficiencies, in-store merchandising,
marketing and selling skills or in customer service, to name a few.
My advice to retailers is to understand their strengths and
weaknesses. Do not focus too much on weaknesses and trying to correct
them. Instead, focus on your strengths and capitalize on them and
Take the example of Walmart. Walmart has several key competencies. A
key competence would be world class supply efficiencies, which they have
leveraged to live up to their motto of “Everyday low prices.”
Expand the store network “rationally”
Retailing is a capital intensive industry. Expansion should be done
with caution and based on objectivity and not subjectivity. (Competitors
have 20 outlets, so we must have 20!). As each location comes in, a new
skill set and new resources come into play.
The dynamics of running an urban outlet versus a suburban outlet are
quite different. In my view, getting the business right is always more
important than going fast (and crashing!)
All retail outlets should be continuously evaluated for
profitability, revenue growth and operational efficiencies. Loss making
locations should be rectified or closed down. You cannot be sentimental
in this regard.
Retailing is a dynamic and evolving industry. To remain healthy and
relevant, retailers have to keep innovating but also keep the basics in
mind. Retail is also detail. Do not forget to go into the operational
details at all times.